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Comment by danpalmer | Hacker News Reader

> I honestly think the 90 day exercise is totally ludicrous in the startup world. I think that should be a major negotiation point with anybody who is joining a startup. They should just insist on it no matter what.

Unfortunately, while the number of options, salary, holiday, etc are relatively easy for a company to change, I think changing the contracts around exercising for a single employee is a change large and complicated enough that companies are unlikely to do it.

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Yea I'll have to find some term sheets laying around, but I can't remember seeing the 90 day exercise being explicitly written into most term sheets. I only have seen it written into people's offer letters. Does anybody know where that language would be written actually otherwise? Some sort of bylaws or something -- seems like that could be relatively easily changed to read something like "exercise period of employee stock options is 90 days after termination of employment unless otherwise stated in employee offer letter and should not be greater than 10 years."

It's usually in the underlying option plan I believe. I think the challenge with changing the 90 day window is that you run the risk of the option not qualifying as an ISO. If that's the case, it would instead be classified as a non-qualified stock option and the holder would lose the capital gains benefits and be subject to ordinary income tax (IANAL though, so could be way off base).

This is roughly correct. The 90-day exercise window isn't just something made up out of thin air to handcuff employees and keep them from leaving.

It's explicitly written into the tax code that an option must be exercised within 90 days of leaving a company if the option is to be treated as an ISO. ISOs are arguably more advantageous than NSOs, which is why this is the default.

That sounds suspect to me. The company I work for gives 90 days + 1 month for every 1 month over a year you work there (so work there 2 years and you have 1 year, 90 days to exercise after leaving).

Is this arrangement just a loophole?

Do they keep you employed for that month? It's fairly common to extend your termination date for health insurance and visa reasons. If you aren't actually terminated, the 90 days wouldn't have started.

The sentence was slightly hard to parse so you may have missed that you get an extra month for each month you are employed over 1 year. So the stated example of a 2 year tenure gives 1 year and 90 days to purchase the options.

Indeed, I parsed it incorrectly.

You likely have a clause where they become NSOs after 90 days.

A workaround is to convert ISOs to NSOs after 90 days. Quora adopted that policy a while ago and a lot of companies followed suit (Square and Pintrest to name a few). Sam A now recommends that approach - http://blog.samaltman.com/employee-equity

This language appears in your stock option grant agreement (or some other very similarly named document). It's probably about 10 pages. You probably signed one when you received your stock option grant. It's full of legalese so a lot of people don't read it very carefully.

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